Property Management in Chula Vista & Bonita
The 2/1 Buy Down
Mortgage Explained
A seller-funded strategy that temporarily lowers your interest rate for the first two years — giving buyers immediate payment relief.
What is a 2/1 Buy Down?
A 2/1 Buy Down is a financing arrangement — typically paid by the seller or builder — where the borrower's interest rate is reduced by 2% in year one and 1% in year two, then settles at the permanent note rate starting year three. The full market rate applies for the life of the loan, but the early savings help buyers adjust to homeownership costs.
Seller Funds Escrow
The seller deposits a lump sum into a buydown escrow account at closing.
Year 1 Rate Drops
Borrower pays 2% below the note rate. Escrow covers the difference.
Year 2 Rate Drops
Borrower pays 1% below note rate. Escrow continues to subsidize.
Year 3 Onward
Borrower pays the full permanent note rate for the remainder of the loan.
Based on a $500,000 loan at a 4.99% note rate (30-year fixed). Principal & interest only.
| Period | Effective Rate | Monthly P&I | Monthly Savings | Annual Savings |
|---|---|---|---|---|
| Year 1 | 2.99% | $2,104 | $575 / mo | $6,900 |
| Year 2 | 3.99% | $2,386 | $293 / mo | $3,516 |
| Year 3+ | 4.99% | $2,679 | — | Full Rate |
| 💰 Total Buyer Savings (2 yrs) | ≈ $10,416 | |||
💼 Who Typically Pays?
- Seller (most common in buyer's markets)
- Home builder or developer as incentive
- Buyer can fund it themselves
- Lender credit (less common)
- Unused funds returned to buyer if they sell or refi early
✅ Why Buyers Love It
- Lower payments while getting settled
- Easier to qualify at reduced rate
- Expect income growth to cover year 3 payment
- Bet on refinancing before full rate kicks in
- Negotiate seller concession instead of price cut
About the Agent
Broker/Realtor
Lic. 01778636
Email: db@kalirealestate.com
Phone: 619-651-0433
Address:
3450 Bonita Rd. Suite 206
Chula Vista, CA 91910
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